President, CEO and director of The Estée Lauder Companies Fabrizio Freda said that he remained “absolutely excited by the potential of China”.
He noted that long-term trends, such as the rising middle class and increasing per capita send, all pointed towards growth for China’s beauty market.
The company aims to serve Chinese consumers “wherever they buy,” said Freda.
“Meaning online, travel retail, brick-and-mortar – we are improving in all these elements. We are increasing the number of cities where we have brick-and-mortar. We are increasing the coverage online.”
The company also believes Hainan will continue to drive growth in China’s travel retail market, even when international travel traffic resumes eventually.
“Hainan is becoming an extraordinary place of luxury with amazing experiences… There are many new retailers which are opening. And so, in Hainan, there is more distribution being built in several retailers which are investing in the Hainan. That's also something that will generate and will continue to generate expansion growth over time,” said Freda.
Furthermore, the company is currently a few months away from unveiling its new innovation centre located in Shanghai.
“Our aspirations for it are bold as we aim to meet and exceed the desires of Chinese consumers. The centre is designed to enable end-to-end innovation from concept for product packaging through development, scale-up and commercialisation,” said Freda.
Prospering in the East
In the second quarter of its 2022 fiscal year, Estée Lauder’s organic sales rose by 5% while operating income in Asia Pacific increased by 6% driven in large part by China, despite the impact of the COVID-19 Delta variant outbreak.
“China delivered high single-digit organic sales growth, an impressive result given the regional restrictions in the quarter that pressured brick-and-mortar and make-up,” said Freda.
On the other hand, online and travel retail sales in China remained untouched by the COVID-19 disruptions.
“Our online, which was not impacted by closures, grew double digits in quarter two and represented more than half of our business in China,” said Freda.
Last year, Estée Lauder launched its brands on Chinese e-commerce platform, JD. According to the firm, the Estée Lauder brand is now ranked the number one flagship store in beauty.
The brand also performed well on Tmall. During the Double Eleven Shopping Festival, Estée Lauder also bagged the top spot in the beauty category for the second consecutive year. La Mer and Jo Malone London also led in their respective categories.
Skin care and fragrance grew by double digits in China and brands including Estée Lauder, La Mer and Dr. Jart+ expanded its share this quarter, said the firm.
